complaints as part of conduct risk strategy

Incorporating Complaints in Conduct risk strategy

Conduct risk is the risk of not meeting expectations that customers’ interests come first. Expectations can be regulatory, societal, and contractual. Typically it covers market integrity as well as investor/customer protection. To be addressed effectively, conduct risk must be defined explicitly for your organization, taking into account activities, staff, and customers.

As expectations change, emerging themes need to be considered and addressed by all providers of financial products and services. Customer concerns and Complaints (IDR/EDR) are an excellent way for firms to learn more about their customers and essential drivers to manage conduct risk.

It is crucial to identify the key indicators that you want to monitor and measure as a first step.

 

  1. Customer concerns: Identifying customer concerns early is a great strategy not only to improve the customer experience but also to identify areas for improvement in product design, distribution, competitive strategy and gaps in terms and conditions. The volume of concern and repeatability are key attributes that need to be measured.
  2. Complaints (IDR): Complaints need to be identified as early as possible. The severity, volume, type and root cause of complaints play an important role.
  3. Complaints at AFCA (EDR): When a complaint ends up with the ombudsman body AFCA, it is a red signal. Although it is not necessary, it is always the firm who is at fault, given the fact that it has ended up at AFCA, highlights systemic risk.

AFCA’s complaint resolution approach may include

    • legal principles
    • applicable industry codes or guidance
    • good industry practice
    • previous relevant determinations of AFCA or predecessor schemes.

Besides the above principles, AFCA considers what is fair in all the circumstances. Since AFCA’s complaint resolution approach covers many of the fundamental criteria of conduct, some of these indicators should be incorporated in conduct risk measurement. Each of these criteria can be allocated a KRI to develop a risk-driven model.

 

 

To understand the full list of criteria and conduct risk mapping strategy, contact us (sales@cognitiveview.com) today for a free workshop.

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